Electronic trading is generally based on a host exchange, one or more computer networks, and client devices. Subscribing traders are connected to an exchange's electronic trading platform by way of communication links to facilitate real-time electronic messaging between themselves and the exchanges. The electronic trading platform includes at least one electronic market, which is at the center of the trading system and handles the matching of bids and offers placed by the traders for that market. The electronic messaging includes market information that is distributed from the electronic market to the traders via an electronic data feed. Once the traders receive the market information, it may be displayed to them on their trading screens. Upon viewing the information, traders can take certain actions including the actions of sending buy or sell orders to the electronic market, adjusting existing orders, deleting orders, or otherwise managing orders. Traders may also use software tools on their client devices to automate these and additional actions.
In addition to trading individual tradeable objects, many traders often implement trading strategies that involve simultaneous trading of two or more tradeable objects. One such trading strategy is commonly referred to as spread trading. In general, spread trading is the buying and/or selling of one, two, or more tradeable objects, one purpose of which is to capitalize on changes or movements in the relationships between the tradeable objects. The tradeable objects that are used to complete a spread are referred to as the outright markets or legs of the spread. A spread trade involves buying tradeable objects, buying and selling tradeable objects, selling tradeable objects or some combination thereof.
As used herein, the term “tradeable object” refers to anything that can be traded with a quantity and/or price. It includes, but is not limited to, all types of traded events, goods and/or financial products, which can include, for example, stocks, options, bonds, futures, currency, and warrants, as well as funds, derivatives and collections of the foregoing, and all types of commodities, such as grains, energy, and metals. The tradeable object may be “real,” such as products that are listed by an exchange for trading, or “synthetic,” such as a combination of real products that is created by the user. A tradeable object could actually be a combination of other tradeable objects, such as a class of tradeable objects.
Whether or not a trader decides to trade one or more tradeable objects, the trader wants to see as many buy and/or sell orders as possible for each particular market. For example, when trading in a particular market, it is useful to see every direct order (e.g., the order's quantity and price) that is in the market, but it is also useful to see every order that has been implied into the market. An implied order is made up of an implied price and its implied quantity. Implied prices and quantities are derived from direct orders in a combination of outright markets, spreads, or other trading strategies. For example, orders in outright markets may imply orders (referred to as an ‘implied in’ orders) into a spread market, and orders in a spread market plus orders in an outright market may imply orders (referred to as an ‘implied out’ orders) into another outright market.
There are different generations of implied pricing. Generations indicate how far removed an implied price/quantity is from a direct price. For example, a first generation implied price is generated from two direct prices, and a second generation implied price is generated using the first generation implied price. Additional generations of implied pricing are determined using the same method.
Most existing matching engines consider implied orders when checking for matches, and some exchanges transmit one or more generations of implied prices and quantities. Because many exchanges match more implied prices than they provide and some exchanges don't even provide implied data, systems and methods have been developed to calculate implied prices and quantities for tradeable objects, and provide the calculated implied data to client terminals to allow traders make better trading decisions based on the more accurate market data. One such system is described in the patent application Ser. No. 10/403,374 filed on Mar. 31, 2003, entitled “A System and Method for Determining Implied Market Information,” the contents of which are fully incorporated herein by reference.
Regardless of how implied prices and quantities are computed, traders wish to view the accurate market conditions so that they can get the best prices for their trades. It is therefore desirable to offer tools that can assist a trader in an electronic trading environment, and help the trader make trades at the most favorable prices in a speedy and accurate manner.